Burnstine v. Margulies

• Decision Date: 12 March 1952
• Docket Number: No. A--534,A--534
• Parties: BURNSTINE v. MARGULIES.
• Court: New Jersey Superior Court — Appellate Division

Page 259

18 N.J.Super. 259

87 A.2d 37

BURNSTINE v. MARGULIES.

No. A--534.

Superior Court of New Jersey

Appellate Division.

Argued Feb. 25, 1952.

Decided March 12, 1952.

Norman Heine, Camden, argued the cause for the appellant (Heine & Heine, Camden, attorneys).

Samuel P. Orlando, Camden, argued the cause for the respondent (Orlando, Devine & Tomlin, Camden, attorneys; Joseph Rappaport, Philadelphia, Pa., of counsel).

Before Judges JACOBS, EASTWOOD and BIGELOW.

The opinion of the court was delivered by

BIGELOW, J.A.D.

This action grows from a fire that occurred in the evening of September 19, 1949, and, according to the complaint, 'destroyed a substantial part' of a store building in the city of Camden, which was leased by the plaintiff-appellant as landlord to the defendant-respondent as tenant. A dispute arose between the parties; the building was not repaired; the tenant ceased to pay rent; a summary judgment for possession was obtained by the landlord February 1, 1950, and she sold the property, the building still unrestored September 1950.

The landlord sues for rent to the time she sold the premises, together with taxes that the tenant had covenanted to pay. The tenant defends on the ground that the landlord was under a duty to restore the premises, and that her failure to do so deprived the tenant of the use of the premises and amounted to a constructive eviction. The tenant also counterclaims for $1,000 which he had deposited with the landlord as security, and for part of the proceeds of fire insurance which had been procured at the tenant's expense and collected by the landlord. The jury returned a verdict of no cause of action on the complaint, and a verdict for the tenant in the sum of $1,000 on the counterclaim. Judgment was entered accordingly. On the appeal the landlord argues only that the trial judge should have directed a verdict in her favor on her complaint and also on the tenant's counterclaim, and that the court erred in one passage of the charge to the jury.

The lease, made in 1946 for a term of ten years, is a very long instrument and like so many documents that are overly elaborate, its meaning in many respects is obscure. The construction of the lease is a matter of law to be determined by the court. Smalley v. Hendrickson, 29 N.J.L. 371 (Sup.Ct.1862); Whittle v. Associated Indemnity Co., 130 N.J.L. 576, 33 A.2d 866 (E. & A.1943). Since the draftsman was the landlord's attorney, the construction of the lease should tend to favor the tenant rather than the landlord. Basic Iron Ore Co. v. Dahlke, 108 N.J.Eq. 68, 152 A. 73 (E. & A.1930). 'A construction which makes the contract fair and reasonable will be preferred to one which leads to harsh or unreasonable results.' Williston on Contracts, § 620.

Article 5 of the lease contains detailed provisions effective in the case of fire: there shall be no abatement or reduction of rent; the tenant will not quit or surrender possession; he will repair and rebuild at his own expense 'except as hereinafter provided for the application of insurance moneys'; if the cost of restoration as estimated by the contractor exceeds $2,500, the tenant will give to the landlord a completion bond for the excess of the cost as so estimated over and above the insurance moneys; the tenant will promptly commence and diligently prosecute the work of restoration in accordance with plans and specifications first approved by the landlord.

Another article of the lease provided that the tenant should, at his own expense, keep the demised building insured against loss by fire at the full cost of replacing the building, less a reasonable amount for depreciation. Disposition of the insurance money is directed by Article 5: it shall be payable to the landlord as trustee and shall be deposited by her in the Camden Trust Company 'as a trust fund for the benefit of the landlord and tenant.' The fund shall be applied to the cost of restoration of the building as the work proceeds. Application of the fund shall be made pursuant to certificates of the architect certifying the cost of the work done to date, but 15 per cent of the amount shown in each certificate shall be paid by the tenant without recourse to the insurance fund. When the restoration is fully completed, the cumulated 15 per cent shall be paid to the tenant. If the insurance moneys are insufficient to pay the entire cost of restoration, the tenant shall pay the deficit. 'After such restoration, rebuilding or replacement shall have been completed and paid for, as aforesaid, the balance of such insurance moneys shall be paid to the tenant and if the tenant shall make default in such restoration, rebuilding or replacement, all of such insurance moneys shall be paid to the landlord. In case of the termination of this lease by reason of a default by the tenant, all funds so deposited and not then applied shall be paid to the landlord for her own use.'

Then comes this important provision: 'The landlord may, at her option, restore, rebuild or replace said building or the part thereof destroyed by fire and in the event that the landlord so elects' to do so, 'and the insurance moneys received are insufficient therefor, the tenant shall remain liable for and pay such excess cost to the landlord.'

Let us now take up the course of events. The fire occurred, as we have mentioned, September 19, 1949. Within 24 hours, Mr. Marks, a New York lawyer who, throughout this matter, acted for Mrs. Burnstine, the landlord, was informed of the fire and went to Camden to acquaint himself with the situation. On October 6, Margulies, the tenant, with his attorney, called on Marks. 'I believe,' testified Marks, 'he even asked me whether Mrs. Burnstine would permit Mr. Margulies to rebuild.' Marks replied that he would take up the question with the Burnstine family. On October 20, a month after the fire, the landlord, having agreed with the insurance company on the settlement of the fire loss, elected to restore the damaged building herself. However, as it turned out, she never even began the work of repair and rebuilding.

Immediately upon the landlord's election to restore, and notification thereof to the tenant, the landlord became obligated to the tenant by an implied covenant to restore. Such an obligation need not be expressly stated but may be raised by words in the lease indicating with reasonable clarity that this was the intention of the parties. Cannock v. Jones, 3 Ex. 233; 154 Eng.R. 829; 5 Ex. 713; 155 Eng.R. 312; affirmed 3 H.L.Cas. 700; 10 Eng.R. 278; 15 Eng.Rul.C. 679; Broad, etc., Corp. v. J. J. Hockenjos Co.,132 N.J.L. 229, 235, 39 A.2d 80 (Sup.Ct.1944). The lease before us exhibits a clear purpose that after a fire, the building should be restored. The stipulation that there shall be no abatement or reduction of rent is especially persuasive, but without that clause the provision for insurance and the entire Article 5 show unmistakably the intention to restore. And it is equally certain that the landlord's election to repair relieved the tenant of the burden and placed it on the landlord.

The landlord was required to begin the work within a reasonable time and to complete it with reasonable dispatch. Gerzebek v. Lord, 33 N.J.L. 240 (Sup.Ct.1869). What was reasonable was a question for the jury, to be determined upon a consideration of all the pertinent circumstances. For instance, the circumstance that rent was running, that the tenant was unable (if such was the fact) to continue his business in the premises until rebuilding was completed, or to obtain temporarily other store premises in the neighborhood.

Now, it was a fact that the tenant was in default in the payment of an installment of taxes which he had covenanted to pay on the due date, August 1, 1949; and 11 days after the fire rent for October fell due but was never paid, and neither was the rent for subsequent months. The landlord took the position to which she still clings, that her obligation to restore was suspended while the defaults continued. This view of the matter is not consistent with another position held by the landlord, namely, that the tenant's covenant to pay taxes and rent, and the landlord's implied covenant to restore, were independent of each other. A default in either was not a valid excuse for a failure to perform the other. See cases cited in Annotation in 28 A.L.R. 1453; also Kinney v. Federal Laundry Co., 75 N.J.L. 497, 68 A. 111 (E. & A.1907); and Silver Rod Stores, Inc., v. Bernstein, 110 N.J.L. 117, 164 A. 450 (E. & A.1933).

The tenant's default in payment of rent and taxes is not a good defense to his claim against the landlord on the covenant to restore, and conversely a breach of the landlord's covenant to restore is not, of itself, a defense to her demand on the covenant to pay rent and taxes. But a breach of the covenant to restore may operate as an eviction. Stewart v. Childs Co., 86 N.J.L. 648, 92 A. 392, L.R.A.1915C, 649 (E. & A.1914); McCurdy v. Wyckoff, 73 N.J.L. 368, 63 A. 992 (Sup.Ct.1906); Weiler v. Pancoast, 71 N.J.L. 414, 58 A. 1084 (Sup.Ct.1904). The case first cited makes the landlord's Intention to deprive the tenant of the enjoyment of the premises an essential element of eviction; but this view of the law must be coupled with a conclusive presumption that the landlord intends the natural consequences of his acts or omissions. Powell v. Merrill, 92 Vt. 124, 103 A. 259 (Vt.1918). By the great weight of authority, there may be a constructive eviction by the...